Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I thank Senators for their contributions. I am conscious that the Finance Bill is a key part of budget 2019 but it must also be seen in the context of the expenditure decisions I announced on 9 October. I wish to address our current environment, refer to other budget decisions to put the Bill into a different light and respond to the points raised by Senators.

Our economy is doing well on an overall level and is making a difference to the living standards of many. However, there are many acute needs which we must meet, such as in the areas of housing, health and the new and emerging needs in schools. An approaching issue with which we must deal is that the international economic landscape is changing. Senator O’Donnell compared Brexit to the weather and asked if the cloud will one day lift. The challenge is that we are in a new climate rather than a new weather cycle. Issues such as the effect Brexit could have on our economy and changes in the global trading landscape such as President Trump standing by the commitment he made today to implement a broad set of tariffs on Chinese imports into the American economy fundamentally affect the trading world Ireland is in and because we are a small open trading economy that very much matters to us. Furthermore, there are significant changes in international tax policy afoot and under way. Many of the changes made by President Trump to American tax policy will, at worst, be neutral for Ireland but they are a sign of the change that is under way. There is a growing trend in many jurisdictions against which we compete to reduce their top line rates of corporate tax. The United Kingdom and France have indicated they wish to do so and the United States has done so. The environment within which we must be competitive and trade is changing.

The budget in its entirety put together a set of changes that means our national finances should be fully balanced by 2019. I indicated before budget day that I expected to go into next year with a budget deficit of 0.1% of our national income. It is now my expectation that our national finances will, at least, be fully balanced next year. In addition, we have decided to prioritise capital investment and investment in public goods, investments that will affect the resilience of our economy and the status of our society. We are increasing capital investment in our schools, homes and public transport next by €1.4 billion, an increase of 25% in investment in our public capital. That is a significant increase to deliver across a single year. Concerns are being raised regarding whether there will be sufficient workers to translate that level of investment into schools, homes and universities that we can afford to pay for at certain price levels. To say that this is a budget that does not deliver investment in those kinds of public goods simply ignores the fact that this is an increase of over 25% compared with where we are this year.

I acknowledge the ongoing constructive role played by Fianna Fáil in the budgetary process while it continues to oppose and challenge many other areas of Government. It is not to be sneered at that at a time when centrist politics is under such pressure in many other parts of Europe and the world, the main Opposition party has agreed three budgets with the Government and honoured those agreements. That is not something I take lightly. However, I continue to challenge Fianna Fáil and many of its claims and policies. We should not take the agreement for granted. Many claimed that we would not get to the third budget. I always believed that we would, and we have.

I point out to Senator Wilson that the clock is now ticking because when this Bill is passed through the Seanad and the social welfare Bill is passed through the Oireachtas we will need to make a collective decision on where we stand. That is something on which I and the Senator’s party colleagues are currently engaged. I understand the points he raised and will deal with them on Committee and Report Stages. He asked about the changes in regard to vehicle registration tax for the car hire and leasing section. I made those changes because the measure, which was implemented in the early 1990s, was costing €20 million per year, which is a very large allocation of taxpayers’ resources for a change that was meant to be temporary. I acknowledge that the change has caused concern and difficulty for some.

I thank Senator Boyhan for his view on what I am trying to do while I hold this office. It is not my policy to abolish the universal social charge, USC. I stated that on my first morning as Minister for Finance. Over time, I hope to try to integrate the revenue from the universal social charge into our social insurance system and to use it to continue to make a contribution to the funding of public services. If I have the opportunity to continue in this office for budget 2020 and beyond, it will not be my intention to abolish USC.

On his question regarding the demands on public services, the demands are great and real. I have experience of them within my constituency and see them in communities across the country. In regard to his point on housing, we will deliver 20,000 new homes next year. The economy will build 25,000 new homes next year. Between one in four and one in five of all homes built in Ireland next year will be built by the State. Although the Senator is correct to call out the crisis in some areas, I wish to emphasise that the investment that he acknowledged is leading to increased output in housing. That is happening and it is a factor in some of the changes in price levels we are beginning to see in the housing market. Similarly, he referred to health and the investment in health. Although I acknowledge the difficulty he raised, the survey on experiences within our health service showed that the vast majority of our citizens in the health service experience outcomes that they believe are good. There is far more to be done and further improvements to be made but we are building more homes and the majority of those in our health services acknowledge their experience to be satisfactory or good. We need to build on that. To respond to the points Senator Kieran O'Donnell made, I believe in getting ourselves to the point at which someone on an average wage no longer pays the higher rate of income tax. It is fair to that person and, ultimately, will be sustainable for our economy as well. The reason I believe it will be sustainable for our economy is that I believe a bedrock of how we should reward someone is that if he or she is at an income of €36,000, which for many people is very much a normal wage against which they must meet all their outgoings, he or she should not be on the higher rate of income tax. My party and I believe this needs to change over time. There is a matter of fairness upon which we can make this case. I also believe that if this is done year on year, the measure can be affordable to the State.

To deal with some of the points Senator Conway-Walsh put to me, this is not a budget for vested interests or one that seeks to ignore the level of social need in our society. It is not acceptable to me that we have people who are homeless. This is the reason an additional €60 million has been made available for this year alone to invest more in services for people who are homeless. It is the reason we will have such increased funding made available for next year to invest in delivering more homes for people and providing the infrastructure to allow homes to be built on private land. I reiterate that for every five homes that will be built next year, at least one will be directly built by the State to meet the needs of people who rely on and deserve a State to support them and ensure they have the kind of safety net that a decent and rich economy such as ours should be able to deliver.

I reject entirely the Senator's claim that we are looking to narrow the tax base, given that hers is the party that is looking to abolish local property tax. As for her claim that we need to stand up to multinationals, they are the same multinationals that provide employment and investment in our economy. What I am looking to do is to get the balance right between having a tax code that is competitive and can attract and retain work in our economy, and dealing with many of the various issues that I know need to be addressed in international tax policy.

Regarding the points Senator Higgins put to me, she opened with her concerns about the income tax policy, which I have touched on. I take a different view from hers in that I believe there is an argument to be made that someone on an average wage in our economy should not already be on the higher rate of income tax. I do not believe, nor indeed did the Senator suggest, that this is some neoliberal attitude to income tax policy. This is an issue of fairness, and I think that budget by budget we can accelerate the kind of progress I have made over the past two years.

As for the points she made to me about gender-proofing of budgets, again, we might be able to deal with this as we move through the different phases of the budget in the House, but the issue she raises is perhaps best dealt with on the expenditure end of the budget. What we have done in our Estimates volume is picked out a number of expenditure areas which have then been considered through a gender prism to look at the outcomes they would deliver for men and women and their potential effects on children. We have picked out a number of policy areas and looked to interrogate them in more detail in respect of their gender impact. I am very much committed to building upon this because I believe that when we make policy decisions, particularly on expenditure, having this perspective in mind will help us to come up with better policies. I did not make a decision on carbon taxation on budget day. I believe we must build up a bigger consensus in our society on carbon taxation. Let us unpack what carbon taxation means. It means putting up the price of petrol, diesel and hard fuels the night of the budget. As the Senator knows, I am a member of a party that was willing to fight the fight on the role charges can play in altering consumption of water. We did not get many supporters when we made that charge.

I am going to approach the argument and the debate concerning carbon taxation with a fair amount of care, given the experience I went through regarding charging for water. The Minister, Deputy Bruton, has outlined our approach and I will work with him on it. It is to see whether we can reach agreement as to what the right level of carbon taxation is in the medium term across all parties. If we can reach this agreement, we will move step by step. I will approach that exercise with care while also recognising that carbon taxing over time needs to change. However, I think we need a more forensic debate as to what the consequences of this would be for citizens. The Senator made some points to me about KEEP, exit tax, landlords and bank losses. We can deal with each of these on Committee and Report Stages and I look forward to debating them with her.

Regarding the point Senator Colm Burke made about the level of administration we now have within the HSE, the issue I have dealt with over the past two years is that I am told by the HSE that we need this level of staff and investment in administration to allow nurses be nurses and doctors be doctors and to ensure that front-line medical professionals have the time and ability during their working day to do what they are trained and hired to do. If the Senator has a different view on this, however, which he clearly does, we will be able to look at it as we move through the budget. As for the point he made about the cost of building apartments outside Dublin, I am well aware of this and the point has been raised with me before. We have a difficulty in that we have price levels in Dublin which we all know are causing great difficulty and concern for citizens but we also know that outside of our cities we still have not hit price levels that make it affordable to deliver apartments in great quantities. One of the ways in which I want to try to address this is through the Home Building Finance Ireland, HBFI, legislation, which I think has passed through the Seanad in the past week. This might offer a way in which we can address the investment end of the equation. Ultimately, we must build homes sustainably and in more places than just our larger cities.

Senator Buttimer raised a number of different issues. He touched on our position on fairness and those who provide and depend on public services, particularly our most vulnerable citizens. All I can do is assure the Senator that as I make decisions along with my colleagues in Departments as to where we allocate resources, the needs of these vulnerable citizens are always uppermost in my mind. The challenge we have is how we can ensure that the very large figures now available to Departments, in particular the Departments of Health and Children and Youth Affairs, can move down into dealing with the issues that the Senator's constituents face so we can ensure that a stable economy is creating the resources for a good society, which is ultimately what my efforts are about, as I know his are.

I have two concluding comments to offer. I am struck by the degree to which the change in the 9% VAT rate has not been opposed or raised to date. This is a positive development.We went through a period in which, because we were unwilling to reverse temporary changes to our tax code, we found our tax base was too narrow when we got into difficulty. In the previous two budgets, I have undone most of the key changes that were made to the tax code to stimulate economic activity in particular sectors. I did this because it is vital that we rebuild a base that gives us the ability to make changes to deal with difficulties in these sectors if we get into difficulty again. In particular, I have changed stamp duty on commercial property. I also changed the 9% VAT rate on the hospitality sector and made a host of other smaller changes. The changes to the 9% VAT rate and stamp duty on commercial property will be worth approximately €1 billion in additional revenue to the State in any given year. While people active and working in those sectors did not want these changes to be made, it is to the credit of the Oireachtas that individual Senators and political parties are willing to maintain a consensus on changing tax measures when circumstances change.

I will end where I began. While I believe the external environment will continue to allow us to make progress, it is changing. For this reason, having national finances that are balanced, increasing capital investment next year when we could have a great external shock and allowing current expenditure to grow in line with national income growth are sensible decisions for the economy. I commend the Finance Bill 2018 to the Seanad.